DA's Plan for Growth and Jobs - Democratic Alliance

FISCAL AND MONETARY POLICY PRIORITIESGetting fiscal policy rightThe DA’s plan to break down barriers and build a high-growth, stakeholder economy will onlywork in a stable and supportive macroeconomic environment. Accordingly, our approach tomacroeconomic policy is to get fiscal and monetary fundamentals right, and to moderate theshort-term fluctuations in growth that drive the business cycle.Our fiscal policy position is updated each year with the publication of our Alternative Budgetshortly before the national Minister of Finance tables his Budget. The budget framework ofrecent Alternative Budgets reflects four main trends in tax policy.First, tax policy should also support a healthy financial system that meets the needs ofsavers and borrowers while providing capital to support growth. In this regard we generallypropose a reduction in taxes on savings and investment.Second, we maintain that tax policy has a key role to play in driving economic growth so wepropose appropriate cuts in corporate and business taxes to enhance the competitiveness ofSouth African businesses.Third, we believe that payroll taxes are a contributing factor to our stubbornly highunemployment rate and should therefore be reduced over the medium term.Fourth, because of economies of scale in investment and the disproportionate share ofwealth that accrues to high income earners, we support the progressive nature of taxationestablished under the current government.We note, however, that the top rates of personal income tax are high relative to ourinternational competitors, and kick in at a lower rate. We maintain, therefore, that there is nospace to adjust these in favour of SARS in the medium term.On the expenditure side there are also several trends that characterise the DA’s fiscaloutlook as indicated in each Alternative Budget. It is important that the budget framework, forexample, does not threaten our fiscal health, hence we have tabled proposals to constrainour debt-to-GDP ratio to no higher than 40% over the medium term.Moreover, the current government's failure to ring fence dedicated revenues is short-sighted.We believe that it is appropriate and just to ring fence certain taxes to ensure that taxpayersget what they pay for.Recent examples that highlight this include the debacle around e-tolling in Gauteng wherethe DA has supported the ring-fencing of the fuel levy to pay for road infrastructure, and thecarbon tax of 2010 which the DA maintained should be ring fenced for expenditure oncarbon-mitigation.Several core principles underpin each of the DA’s Alternative Budgets. These are:Policy certainty: One of the consequences of the ideological factionalism in theANC is the lack of certainty around economic policy. Ministers from variousideological backgrounds table contradictory policy documents and implementation isblocked by shifting factions at Cabinet level. While the New Growth Path posits abigger role for the state in the economy, the National Development Plan takes theopposite view. A DA government would speak with one voice on the economy.35 | P a g e